Understanding Deed of Trust and Mortgage

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By: Donthi Anand

Before owning a property or a home it is necessary to have a thorough understanding with various terms and documents that are used in the matters of real estate law. Such real estate law documents differ from state to state and it is advisable to have a great deal of knowledge before purchasing a home.

A major difference of real estate documentation is, if the state uses a deed of trust or mortgages. The deed of trust involves three parties and makes the process of foreclosure faster and easier. A deed of trust is much similar to a mortgage.

In case of a mortgage loan the homeowner will enter into a deal with the lender and throughout the mortgage period the deed of the home remains in the possession of the homeowner. According to the mortgage agreement if a homeowner defaults home loan repayments, the lender will have to take necessary steps in going through a long process of foreclosure.

Mortgages are taken out as a way to secure debt against the home or for other reasons that will depend upon the home owner and their unique situation. Mortgages are made between two people, the lender and the home owner

Whereas a deed of trust requires three parties: the homeowner, the lender and the trustee. The trustee will be responsible for holding the deed until the initial agreement is fulfilled either by the homeowner by virtue of complete payments or by the lender having to foreclose on the property. The foreclosure process under deed of trust is easy and much faster than a mortgage foreclosure.

If an owner with a deed of trust is no longer able to make payments on the home then the lender can begin foreclosure procedures. This does not involve the courts as it does with the judicial foreclosure, which is used for mortgages. Such a quick and easy foreclosure is often cheaper and allows the lender to regain any losses accrued at an earlier date.

Before buying a home see if your state uses mortgages or deeds of trust. The differences between deeds of trust and mortgages may seem to be negligible but whatever the difference that exists can be of great importance to home owners. If you are not comfortable with a mortgage then do not buy a home in a state that does not use deeds of trust. Similarly if you are uncomfortable with deeds of trust then don't buy a home in a state that does not uses mortgage. You cannot get a choice to choose the type of the document you got to find out which state uses mortgage or deeds of trust.

If you are going to have a deed of trust make sure you understand your legal rights and obligations to avoid having your home foreclosed. Unlike judicial foreclosures, the lender will not have to take you to court first and so you may have very little time to fight the proceedings.